Consumer prices surged by 2.3% in April from a year ago – the largest increase since 2008. This jump represents a modest uptick in inflation, still well above the Federal Reserve’s target rate of 2%. This new jump is much less than the shocking high of more than 9% in 2022. (Reuters) Economists and consumers alike are looking at a changing economic landscape. As has long been their concern, they worry about inflationary pressures from former President Donald Trump’s tariff-heavy trade policy.
In fact, as we’ve previously noted, Federal Reserve Chair Jerome Powell has repeatedly warned that Trump’s escalating tariffs would create the conditions for higher inflation. This, in turn, would stifle economic growth. He underscored that despite these challenges the economy is in “very solid shape.” He pointed out that the mechanisms and exact relationship between changing tariffs and overall inflation is highly complex and uncertain.
“If the large increase in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation and a slowdown of economic growth,” – Jerome Powell
Global demand for oil is down enough to bring gasoline prices down by a full 12% in the past year. The nationwide average is currently $3.15 per gallon. These prices are still exorbitant compared to the same time last year. They were down 10% from March to April. This industry average result in consumer goods demonstrates the disparate impact of inflation on the economy’s different industries.
Many analysts are concerned that inflation is about to re-ignite in the near future. This apprehension comes as retailers unsuccessfully attempt to replenish their inventories with goods that were imported before tariffs kicked in. The rollback of levies on Chinese goods is projected to reduce costs for families by hundreds of dollars. Through this year, the average tariff per household will fall from almost $4,900 to only $2,800. A 10% tariff on imports from all other countries. Further, duties continue to be imposed on certain products imported from Mexico and Canada.
Given how new these policies are, even Powell admitted they don’t know what sort of impact they’ll have on the economy.
“All of these policies are evolving, however, and their effects on the economy remain highly uncertain,” – Jerome Powell
July’s inflation reading of 2.3% came in on target with economists’ expectations and is the lowest inflation rate recorded since 2021. As consumers navigate through these fluctuating prices, the Federal Reserve continues to monitor economic indicators closely to inform its monetary policy decisions.
